U.S. tax cut worries derail hopes of longest winning run in 14 years

NEW YORK (Reuters) - Broad equity market declines in Asia and Europe on Thursday, combined with growing concerns that the Republican-led U.S. corporate tax cut may not pass this year, spoiled the longest winning streak for MSCI’s global stock index since 2003.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., November 8, 2017. REUTERS/Brendan McDermid

Wall Street stocks extended losses, pushing down the benchmark S&P 500 Index as much as 1 percent, after Republican Senator Bill Cassidy, a member of the U.S. Senate Finance Committee, said the Senate tax proposal will delay a corporate tax cut by one year to 2019. Major stock indexes came off their session lows after Senator John Cornyn said Senate Republicans were looking to avoid such a delay, yet remained in the red. [.N ]

The Dow Jones Industrial Average .DJI fell 101.42 points, or 0.43 percent, to end at 23,461.94, the S&P 500 .SPX lost 9.76 points, or 0.38 percent, to 2,584.62 and the Nasdaq Composite .IXIC dropped 39.07 points, or 0.58 percent, to 6,750.05.

“The stock market has run out of a little momentum,” said Societe Generale strategist Kit Juckes. “We are waiting for some news from the Republicans on the (U.S.) tax plans, there is a bond market that has stalled and we’ve got rather soggy-looking emerging markets ... We probably need to get U.S. Treasury yields higher to get things going again.”

Junk bonds fell to their lowest intraday levels since March, victims of a broader flight to safety as the Republican-led proposed U.S. corporate tax cut seemed on the verge of a delay. Benchmark 10-year U.S. Treasury notes US10YT=RR were last down 5/32 in price to yield 2.3328 percent, from 2.317 percent late on Wednesday.

A man is reflected in an electronic stock quotation board outside a brokerage in Tokyo, Japan, October 23, 2017. REUTERS/Issei Kato

Earlier in the day, Japan’s Nikkei index .N225 swung by a wild 2 percent after hitting its highest since 1992 [.T] and Europe's main indexes were firmly in the red as tech and commodity stocks tumbled while Brexit talks resumed amid low expectations in Brussels.

But as a measure of relative calm amid the current bull market and a reflection of the low volatility environment that has dominated all year, none of the most recent 10 daily gains has exceeded half a percent and more than half of them were less than 0.1 percent.

TAXING TIMES

The dollar index .DXY, which tracks the greenback versus a basket of six key currencies, fell 0.342 point or 0.36 percent, to 94.524.

“There’s very much a risk of disappointment. The U.S. dollar could go through a weakening phase on the back of uncertainty around that tax reform,” said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne.

Some also focused on fallout from Democrat wins in regional U.S. elections this week as a signal for next year’s mid-term congressional elections for President Donald Trump.

Trump was in China on Thursday, pressing President Xi Jinping to do more to rein in North Korea and to open the Chinese economy, the second-biggest in the world after the United States, to more foreign firms.

The euro EUR= was last up 0.41 percent, at $1.1641 while Europe's broad FTSEurofirst 300 index .FTEU3 dropped 1.09 percent at 1,534.88.

Oil prices steadied just below two-year highs, supported by supply cuts by major exporters, but analysts said the market could be vulnerable to a sell-off after several months of gains. U.S. crude CLcv1 rose 0.51 percent to $57.10 per barrel and Brent LCOcv1 was last at $63.87, up 0.6 percent.